On June 26, 2023, U.S. Treasury Secretary Scott Bessent announced a significant move in the ongoing discussions regarding tax policy. He urged Republicans in Congress to eliminate the Section 899 retaliatory tax proposal from their tax and spending bill. This development follows a crucial agreement reached with the Group of Seven (G7) industrial nations, aiming to protect American interests in the global economic landscape.
Section 899 would have granted President Donald Trump the power to retaliate against countries that impose taxes on U.S. companies, in line with a global tax agreement established in 2021 that Trump deemed unfair. This proposal has faced considerable opposition from various factions within the Republican Party and U.S. corporate interests, prompting Bessent's intervention.
Following months of constructive dialogue with international partners on the OECD Global Tax Deal, Bessent expressed optimism about the recent G7 agreement. He stated that a joint understanding among G7 countries has been established, which aims to bolster American economic interests. Notably, this agreement stipulates that the 15% global corporate minimum tax will not be applicable to U.S. companies under Pillar 2 of the OECD tax framework. This is a significant win for the U.S. administration and its corporate stakeholders.
Bessent emphasized the importance of cooperation among G7 nations to implement this agreement within the OECD-G20 Inclusive Framework in the upcoming weeks and months. The G7 agreement also appears to facilitate Trump's potential fulfillment of his inauguration day promise to withdraw the U.S. from the OECD tax deal negotiated by former President Joe Biden's administration, with minimized repercussions.
In light of Bessent’s announcement, prominent House Republicans indicated on Wednesday that Section 899 could be removed from the fiscal package. The Republicans are pushing for final votes on this extensive fiscal package, which includes the extension of the 2017 tax cuts for individuals and introduces additional tax breaks. This expedited timeline aims for Trump to sign the bill into law before the upcoming July 4th U.S. Independence Day holiday.
Bessent concluded with a strong message regarding the significance of the agreement with G7 partners, stating, “This understanding provides greater certainty and stability for the global economy and will enhance growth and investment in the United States and beyond.” This sentiment underscores the administration's commitment to fostering a favorable economic environment both domestically and internationally.
Reporting by Bhargav Acharya; Editing by David Gregorio. Bhargav Acharya is based in Johannesburg and covers breaking news across Sub-Saharan Africa. He has reported on major stories, including the release of former Paralympic star Oscar Pistorius and the historic 2024 South African election. In 2023, he was part of the team recognized by Reuters as Journalists of the Year for their coverage of Africa.
